Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks this morning are mixed with the Euro Stoxx 50 down -0.21% and Mar S&Ps unchanged. The dollar is weaker and commodities are mixed as debt-swap talks between Greece and its private creditors continues with EU Economic and Monetary Affairs Commissioner Rehn saying authorities are "very close" to reaching an agreement on a private-sector involvement this month. According to the head of the European Commission's economic division, Greece must repay 14.5 billion euros of bonds in March and an agreement that triggers as much as $3.2 billion of default insurance may be necessary unless all bondholders approve. The euro strengthened against the dollar as Italian borrowing costs fell after Italy auctioned 8 billion euros of 182-day bills at a yield of 1.969%, down from 3.251% at a similar auction last month and the lowest in 8 months. Undercutting European stocks was the larger-than-expected increase in Spain's Q4 unemployment rate to 22.9%, higher than expectations of 22.2% and the highest in 15 years.
- Asian stocks today closed mixed with Japan down -0.09%, China closed for holiday, Australia +0.40%, South Korea +0.44%, India +0.92%. Japanese stocks fell as the yen strengthened and exporters declined, even after Prime Minister Noda pressed the BOJ for "bold" action to curb the yen's gains. Limiting losses in Japanese stocks was the +2.5% y/y increase in Dec Japan retail sales, stronger than expectations of +2.1% y/y and the biggest increase in 16 months. South Korean stocks finished higher, led by a rally in Samsung which rose 1.1% to a record high after the company reported Q4 net income of 4 trillion won ($3.6 billion), better than analysts' estimates of 3.99 trillion won. India's rupee surged to an 11-week high against the dollar after the RBI earlier this week cut banks' reserve requirements by 50 bp to 5.5%, which prompted investors to boost their holdings of Indian assets on speculation economic conditions will improve with an easing of monetary policy.
- March S&Ps this morning are trading unchanged. The US stock market on Thursday opened higher on stronger-than-expected Dec durable goods orders but shed its gains and settled lower after Dec U.S. new home sales unexpectedly declined and Dec leading indicators rose less than expected: Dow Jones -0.18%, S&P 500 -0.57%, Nasdaq Composite -0.46%. The S&P 500 posted a 6-month high, the Dow posted an 8-1/2 month high and the Nasdaq posted a 10-3/4 year high, but they all shed their advances and closed lower. Bearish factors on Thursday included (1) the larger-than-expected increase in weekly initial unemployment claims (+21,000 to 377,000 versus expectations of +18,000 to 370,000), (2) the smaller-than-expected increase in Dec leading indicators (+0.4% versus expectations of +0.7%), (3) weakness in homebuilders after the unexpected decline in Dec U.S. new home sales (-2.2% to 307,000 versus expectations of +1.9% to 321,000), and (4) weakness in bank stocks on concern the Fed's pledge to maintain record low interest rates until 2014 may hurt banks' earnings prospects and their profitability.
- Bullish factors included (1) the stronger-than-expected Dec durable goods orders along with the upward revision to Nov (Dec +3.0% and +2.1% ex transportation versus expectations of +2.0% and +0.9% ex transportation and Nov revised up to +4.3% and +0.5% ex transportation from the originally reported +3.7% and +0.3% ex transportation), (2) decent Q4 reported earnings thus far as 68% of the 146 companies in the S&P 500 that have reported earnings results since Jan 9 have beaten per-share earnings estimates, and (3) reduced European debt concerns as Italian borrowing costs fell after Italy sold 4.5 billion euros of zero-coupon 2014 debt, the maximum target, at a yield of 3.783%, down from a similar-maturity auction last month of 4.853%.
- March 10-year T-notes this morning are down -2.5 ticks. T-note prices on Thursday posted a 1-week high and settled higher on carry-over support from Wednesday's action by the Fed to extend record-low interest rates until late 2014 along with an unexpected decline in Dec U.S. new home sales: TYH2 +21.5, FVH2 +7.5, EDM2 +.020. Bullish factors included (1) carry-over support from Wednesday's action by the Fed to extend record-low interest rates until late 2014 along with speculation the Fed may implement QE3 after Fed Chairman Bernanke said policy makers are "prepared to provide further monetary accommodation," (2) the smaller-than-expected increase in Dec leading indicators (+0.4% versus expectations of +0.7%), and (3) the unexpected decline in Dec U.S. new home sales (-2.2% to 307,000 versus expectations of +1.9% to 321,000). Bearish factors included (1) the stronger-than-expected Dec durable goods orders along with the upward revision to Nov (Dec +3.0% and +2.1% ex transportation versus expectations of +2.0% and +0.9% ex transportation and Nov revised up to +4.3% and +0.5% ex transportation from the originally reported +3.7% and +0.3% ex transportation), and (2) slack demand for the Treasury's $29 billion 7-year T-note auction that had a bid-to-cover ratio of 2.73, below the 12-auction average of 2.82.
- The dollar index this morning is weaker with the dollar/yen -0.51 yen and the euro/dollar +0.33 cents. The dollar index on Thursday dropped to a 1-1/2 month low and settled lower on carry-over weakness from Wednesday's Fed action to extend record low interest rates until late 2014 along with a decline in Italian borrowing costs that lifted the euro: Dollar Index -0.184, USDJPY -0.326, EURUSD +0.00028. Bearish factors included (1) carry-over weakness from Wednesday's Fed action to extend record low interest rates until late 2014 from mid-2013, which weakens the dollar's interest rate differentials, (2) a decline in Italian borrowing costs which lifted the euro to a 1-month high against the dollar after Italy sold 4.5 billion euros of zero-coupon 2014 debt, the maximum target, at a yield of 3.783%, down from a similar-maturity auction last month of 4.853%, and (3) an improvement in European funding conditions which reduced the safe-haven demand for the dollar after the 3-month cross-currency basis swap, the rate banks pay to convert euro interest payments into dollars, narrowed to 68 bp below the euro interbank offer rate, the least expensive in 5-1/2 months.
- Mar crude oil prices this morning are up +22 cents a barrel and Mar gasoline is +1.62 cents per gallon. Crude oil and gasoline prices on Thursday settled higher after U.S. durable good orders rose more than expected and the dollar declined: CLH12 +$0.30, RBH12 +1.34. Mar gasoline rallied to a 3-1/4 month high. Bullish factors included (1) the slump in the dollar index to a 1-1/2 month low, which boosts investment demand in commodities, (2) the larger-than-expected increase in Dec U.S. durable goods orders, which signals economic strength that is beneficial for energy demand and consumption, and (3) strength in gasoline on potential supply shortages on the U.S. East Coast after the recent shutdown of Pennsylvania refineries by Sunoco and ConocoPhillips and the closure of the St. Croiz refinery by Hovensa LLC. Bearish factors included (1) the announcement by Libya's National Oil Corp. that Libya's crude production had increased to 1.3 million barrels a day on Jan 25 from 1.0 million barrels a day last month and (2) concerns over the sustainability of U.S economic growth after Dec U.S. new home sales unexpectedly declined and Dec leading economic indicators rose less than expected.
Global Financial Calendar
| Friday 1/27/12 | |
|---|---|
| United States | |
| 0830 ET | Q4 U.S. GDP expected +3.0% annualized, Q3 +1.8% annualized. Q4 personal consumption expected +2.4%, Q3 +1.7%. Q4 GDP price index expected +1.9%, Q3 +2.6%. Q4 core PCE expected +0.9% q/q, Q3 +2.1% q/q. |
| 0955 ET | Final Jan U.S. University of Michigan consumer confidence expected unchanged at 74.0, previous +4.1 to 74.0. |
| Germany | |
| 0200 ET | Dec German import price index expected +0.3% m/m and +3.8% y/y, Nov +0.4% m/m and +6.0% y/y. |
| Euro-Zone | |
| 0400 ET | Dec Euro-Zone M3 money supply expected +2.3% 3-mo avg and +2.1% y/y, Nov +2.5% 3-mo avg and +2.0% y/y. |
| 0600 ET | ECB Executive Board member Jose Manuel Gonzalez-Paramo speaks at an event in Madrid. |
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